Shareholders urged to check their rights in company disputes

02 Mar 2020

Published in: Member News

Shareholders urged to check their rights in company disputes

Shareholders who do not own a controlling stake in businesses are being urged to check their rights in the event of disputes with directors and other stakeholders.

 

Commercial litigation lawyer Sam Pedley believes too many minority shareholders think they have to “sit on their hands” and just accept decisions they think are wrong being forced through by those with the biggest stake in the business.

 

But the partner at Midlands law firm mfg Solicitors said they should not just live with the consequences, particularly as it could result in them losing out financially or to the detriment of the Company, if they fail to act.

 

Mr Pedley said: “How much of a say you have depends largely on what proportion of the shares you own, but some minority shareholders may have more power than they think.

 

“Some shareholder agreements grant rights of veto on certain actions, such as selling particular assets or making Company strategy decisions.

 

“There’s also the right to raise an unfair prejudice petition if the company’s affairs haven’t been conducted in a fair way or if the directors are paying themselves far too much money.

 

“Shareholders also have powers to wind up the company although that really is very much the last resort and they would need strong evidence to show they had been frozen out.”

 

Mr Pedley added that shareholders should seek legal advice about the rights they have under their agreements, Company constitution and the protections offered by the law if they think the majority shareholders or directors are doing the wrong thing.”

 

“There are protections and a variety of tools available to address these issues but too many minority shareholders don’t know about them and end up just cutting their losses or sitting on their hands,” he said. “I see it too often and it doesn’t have to be that way.”

 

Mr Pedley, an award-winning lawyer who is also recognised in the Legal 500 and Chambers and Partners for his legal advice, can be contacted for advice through www.mfgsolicitors.com or by emailing samuel.pedley@mfgsolicitors.com.

Submitted by Lorraine from MFG Legal Services Limited
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